HMRC wins Gaines-Cooper case at Supreme Court
The long running tax case between HMRC and Mr Robert Gaines-Cooper came to a head recently when the Supreme Court held by a majority of 4-1 in HMRC’s favour. The case was about the tax residency position of Mr Gaines-Cooper including whether reliance could be placed on HMRC’s own internal guidance.
Background
There are many factors which need to be taken into consideration when establishing whether an individual is UK tax resident and there is currently no statutory definition for residence (although a “Statutory Residence Test” is likely to be enacted in April 2012). At the time of Mr Gaines-Cooper’s dispute HMRC had published its guidance on the factors which would be taken into account when deciding on residence – this was known as “IR20” – this has now been superseded by “HMRC 6”. Mr Gaines-Cooper claimed he relied on this guidance when planning his tax residency status.
The Court ruled that the common interpretation of the HMRC guidance, that residence was largely determined by days spent in the UK, was too simplistic and the taxpayer’s overall position must be considered.
20 October 2011
EDF Tax says:
The ruling may have far reaching implications for other taxpayers who have relied on IR20 (or HMRC 6) to determine their tax residency position. Paragraph 45 of the decision states that that any decision by the tax authorities on residence must be based on a “multifactorial” assessment of the circumstances.
The judges did say that in order to lose UK tax residence a “distinct break” from the UK was required – ie it is not simply a case of counting the days in and out of the UK. The enactment of a Statutory Residence Test from next April should give more certainty going forward however this will not help any cases which HMRC are currently enquiring into.
Mr Gaines-Cooper is taking legal advice on whether to appeal against the ruling.
Who to contact?
For further information contact Alan Garrett on 0115 983 5580 or email at agarratt@edftax.co.uk.